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Environmental Quality in a Differentiated Duopoly

Y. Hossein Farzin () and Ken-Ichi Akao

No 2006.138, Working Papers from Fondazione Eni Enrico Mattei

Abstract: In a duopoly industry with environmentally differentiated products, we examine the effects of introducing a mandatory environmental quality standard on firms’ environmental quality choices, profits, and the average environmental quality offered by the industry. We show that at low standard levels, both firms choose to overcomply regardless of the standard level. At intermediate levels, the mandatory standard can reduce the profit of the low-cost firm while increasing that of the high-cost firm, and that it can lower the industry’s average environmental quality below what it would be without the standard.

Keywords: Duopoly; Environmental Quality; Mandatory Environmental Standard; Overcompliance; Product Differentiation (search for similar items in EconPapers)
JEL-codes: Q58 L13 L51 D43 (search for similar items in EconPapers)
Date: 2006-11
New Economics Papers: this item is included in nep-com, nep-env, nep-ind, nep-mic and nep-res
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